Consumer Law & Policy Blog

Dept of Education approves $238 million group discharge for 28,000 Marinello Schools of Beauty borrowers

The Department of Education announced it will discharge the loans of tens of thousands of borrowers harmed by pervasive and widespread misconduct at Marinello Schools of Beauty. Borrowers who enrolled in the schools from 2009 through its closure in February 2016 will receive loan discharges totaling approximately $238 million. This group discharge includes former students who have not yet applied for a borrower defense discharge. The Department's press release is here.

FTC seeks comment on combatting tech-support scams and adding click-to-cancel requirements

The Federal Trade Commission is proposing to extending protections against telemarketing tricks and traps to small businesses and strengthening safeguards against other pernicious telemarketing tactics aimed at consumers. That notice seeks comment on whether the FTC should amend the Telemarketing Sales Rule to prohibit misrepresentations in business-to-business calls, and whether the FTC should amend the rule’s recordkeeping provisions to require telemarketers to retain information in seven new categories, such as keeping recordings of robocalls. The notice of proposed rulemaking is here.

Through a separate notice, the agency is seeking comments on updates to the Telemarketing Sales Rule that would protect small businesses against business-to-business telemarketing schemes, address tech-support scams that target seniors, and extend click-to-cancel requirements to telemarketing.The advanced notice of propose rulemaking is here.

Republicans complaining about lack of accountability of CFPB director who serves at the pleasure of the president

by Jeff Sovern

Remember how Republicans complained how the CFPB was an unaccountable agency because its director could be fired only for cause? And then the Supreme Court ruled in Seila Law that the "for cause" removal limit was unconstitutional so that the president could fire the director without a showing of cause? You might think that Republicans would no longer be complaining that the Bureau is unaccountable, but you would be wrong. According to The Hill, Senator Toomey, the ranking minority member of the Senate Banking Committee, was still singing the same old tune about the Bureau being unaccountable at today's congressional hearing. It's almost as if they object to having an agency protect consumers.

Biden considering options for forgiving federal student loan debt

President Biden is reportedly looking at options to forgive most, if not all, federal student loan debt. He shared his plans during a 90-minute White House meeting Monday with members of the Congressional Hispanic Caucus. As CBS News reports, the move could affect more than 43 million borrowers who hold more than $1.6 trillion in federal student loan debt.

The American retirement system is built for the rich

"The American retirement system is built for the rich -- Lawmakers proclaim they want to help the middle class save. But that’s not who benefits most from IRAs and 401(k) plans." Read this Washington Post essay on that topic by law prof Daniel Hemel.

Forced arbitration backfires on Uber

A cautionary tale on forced arbitration:

Uber’s platform Uber Eats allows customers to order takeout from various restaurants and have it delivered by a driver for a restaurant-specific delivery fee. Customers are required to agree to Uber's Terms of Use, which contains a provision stating that any dispute between the customer and Uber will be settled by binding arbitration administered by the American Arbitration Association in accordance with AAA's rules. After the death of George Floyd in June 2020, Uber announced that it would waive its delivery fee for orders placed at qualifying Black-owned restaurants from June 4, 2020, through December 1, 2020.

Shortly after, the law firm of Consovoy McCarthy PLLC began searching for Uber Eats customers who paid a delivery fee to a non-Black-owned restaurant during the relevant time and asking them to challenge the lawfulness of Uber's policy by claiming that it constituted unlawful reverse race discrimination. The law firm eventually filed more than 31,000 substantively identical arbitration demands with AAA against Uber.

In December 2020, AAA accepted and agreed to administer the claims according to its rules, which included a fee schedule for individual cases. According to the fee schedule, for each case, Uber would owe AAA a $500 filing fee, a $1,400 standard case management fee, and a $1,500 arbitrator fee, for a total of approximately $107 million if charged the full amount. AAA exercised its discretion as to the filing fee, and reduced it to approximately $4.3 million, which Uber paid.

The parties and AAA then engaged in months of fruitless negotiations to come up with a more efficient process for dealing with the 31,500 arbitration cases. Then in April 2021, AAA told the parties that absent an agreement between them, it would administer the cases pursuant to its rules, including invoicing fees according to the fee schedule—under which Uber would owe more than $91.6 million. Uber subsequently paid a total of $667,800, for the first batch of cases. When AAA issued an invoice demanding payment of $10.879 million for case management fees for the second batch, Uber sued AAA alleging that its invoicing was unlawful.

In a decision issued last week, affirming the trial court’s denial of Uber’s motion for a preliminary injunction, the court concluded: “While Uber is trying to avoid paying the arbitration fees associated with 31,000 nearly identical cases, it made the business decision to preclude class, collective, or representative claims in its arbitration agreement with its consumers, and AAA's fees are directly attributable to that decision.”

Notably, without Uber's forced arbitration provision, the customers would have had to pay any court filing fees and surely would have filed as a single class action. The big winner from Uber's forced arbitration provision is [drumroll] AAA.

Inaugural episode of Consumer Law and Economic Justice Podcast now available

Here. The first episode features a conversation with Abbye Atkinson, professor at Berkeley Law, about her article, Borrowing Equality, published in the Columbia Law Review, and the relationship among credit, debt, social relationships, inequality, and what should be done to pave the way for a better world for borrowers.

The podcast will broadcast conversations with consumer scholars and practitioners about their work and the latest consumer and economic justice issues. The interviewers will be students. This episode's interviewer is Blair Hendricks, a third-year student at St. John's Law and president of the St. John's chapter of the National Association of Consumer Advocates.

Newsday essay calls for amending NY's UDAP law to give NY consumers the protections many red state consumers have

Here. My latest guest essay.

Study finds borrower race does not affect appraiser valuation

Brent W. Ambrose of Pennsylvania State, James Conklin of Georgia, N. Edward Coulson of California, Irvine - Paul Merage School of Business, Moussa Diop of USC, and Luis A. Lopez of the University of Illinois at Chicago have written Does Appraiser and Borrower Race Affect Valuation? Here's the abstract:

Following concerns about undervaluation of minority-owned homes, we examine the incidence of racial appraisal bias using a nationwide sample of refinanced mortgages from 2000 to 2007. A unique feature of our data is that they allow us to observe the race of the both the homeowner and the appraiser. We do not observe large, systematic differences in the ratio of appraised values to automated valuation model (AVM) estimates between Black- and White-owned homes. Moreover, the appraiser's race and its interaction with the owner's race are not related to valuations. Our findings suggest that racial appraisal bias is either uncommon in the mortgage refinance market or has a relatively minor effect on valuations, on average.

Some clothing retailers make more than half their income from their overpriced credit cards

The Conversation has an interesting piece titled Store credit cards generate corporate profits and disgruntled workers, by a pair of sociology professors, Joya Misra and Kyla Walters. Excerpt:

Major apparel companies also sell credit, often with very high fees, like The Gap’s 21.7% starting interest rate, and US$27 to $37 late payment charge. In 2019, Macy’s store credit card revenue of $771 million accounted for more than half of Macy’s operating income.

[M]any workers identified mandates to push credit card applications on customers as the worst part of their jobs. *

Why do workers find this task so troubling?

Our research shows that they know – sometimes from personal experiences – how credit cards can ruin a person’s finances.

* * *

Gabe, another American Eagle employee, refers to his store’s credit card as “a Visa that has the American Eagle logo at an extremely high interest rate,” explaining that only “gullible” customers sign up.

* * *

Tara, a shift lead at American Eagle, said she needed to sell 2.5 credit cards for every 10 transactions at the cash register.

Old Navy managers also expected cashiers like Danielle to sell two cards per shift. Special sales events intensify these goals. For example, Danielle was told to sell five to 10 credit cards during Black Friday shifts.